Chapter 3

Question 1

What is Operational Risk?

Answer 1

Risk of loss resulting from failed or inadequate internal process, people and systems or from external events.

Question 2

Where do Basel operational risk events arise?

Answer 2

• Internal fraud.
• External fraud.
• Employment practices & workplace safety.
• Client’s, products & business practices.
• Damage to physical assets.
• Business disruption & systems failures.
• Execution, delivery, and process management.

Question 3

How do losses occur from Internal fraud?

Answer 3

Acts intended to defraud, misappropriate property or circumvent the law by at least 1 internal party

Question 4

How do losses occur from External fraud?

Answer 4

Acts intended to defraud, misappropriate property or circumvent the law by a third party.

Question 5

How do losses occur from inadequate Employment practices & workplace safety?

Answer 5

Acts inconsistent with employment, health or safety laws or agreements from payment of personal injury claims or from diversity and discrimination events.

Question 6

How do losses occur from inadequate Client’s, products & business practices?

Answer 6

Unintentional or negligent failure to meet professional obligation to specific clients, or from the mature or design of a product.

Question 7

How do losses occur from damage to physical assets?

Answer 7

Loss or damage of physical assets from natural disasters or other events.

Question 8

How do losses occur from Business disruption and system failures?

Answer 8

Disruption of business or systems failures.

Question 9

How do losses occur from inadequate Execution, delivery, and process management?

Answer 9

Failed transaction processing or process management.